Nine takeaways from the latest report on solar-plus-storage

The latest Green Tech Media report on U.S. solar-paired-with-storage, reviewed by media this morning at Intersolar North America, says the storage market is “nascent,” while activity within it is “frantic.” The report, supported by Intersolar North America, ees North America and CalSEIA, looks at storage technologies, behind-the-meter issues and storage in different market segments. It also offers a market outlook.

Here are nine key takeaways from the report:

Battery and system costs will continue to drop for the next four to five years. By 2020, GTM expects battery costs to reach $250 – $300/kWh. In 2014, costs hovered around $500/kWh. An important note: Batteries are useless without a system (including inverters) to support them. System components can be as much as 60% of the total installed cost, but their prices are trending downward, too.

Five states offer incentives for behind-the-meter storage systems. California’s SGIP program is the largest, offering $1.46/W in 2015. Hawaii, New Jersey and New York are supporting solar-plus-storage projects with cost sharing and upfront incentives for commercial customers. Arizona has proposed a $1 million rebate program to study the grid benefits of solar-plus-storage.

Batteries for a backup power supply will struggle to make economic sense in most cases. Historically, backup power has been the leading driver of battery usage, and it is still important in regions with an unreliable grid (emerging countries, for instance). But for back-up power to pencil today in, say, California, the consequences of not having it need to be sufficiently high. This could be the case for financial and data centers, where a 24/7 power supply is critical. Even then, however, solar-plus-storage will compete with natural gas generator sets, which have a much lower upfront cost. One exception to this rule is when a case can be made for the public good. For example, federal incentives helped equip 115 schools with solar-plus-storage in Florida, and state funding will build 13 solar-backup systems as part of an Energy Resiliency Bank in New Jersey.

Time-of-use electricity rates will lead more residential consumers to energy storage. With storage, consumers can use their excess solar generation from the middle of the day, when electricity consumption in homes is low, to peak hours in the evening – when families arrive home and fire up their electronics. In order for the economics to work, the differential between peak and off-peak energy rates must be sufficient.

Attacks on net metering could increase storage use among households. More than 30 states offer net metering at the full retail rate. If a consumer receives fair compensation for the energy he produces mid-day with a solar system, storage doesn’t make much sense. But retail-rate net metering is under attack in 20 states. Storage may be necessary to enable solar if its value is reduced via changes to net metering structure, according to GTM, but solar-plus-storage may still only be viable for a limited set of customers.

Storage for commercial use has a clear driver: time-of-use tariffs. Demand charges can contribute from 20% to 50% of a commercial customer’s electricity bill. Solar alone can’t be relied on to offset those charges, as its intermittent nature could lead to a mismatch between peak demand and generation. But pairing storage with solar enables a reduction of peak demand energy use, though the extent of reduction depends on a number of factors, key among them is a customer’s load profile. When does the customer use most of its energy? If it’s during peak demand hours, the economics of solar-plus storage could become more attractive.
By 2020, GTM Research forecasts 769 MW of solar-plus-storage, much of it in the residential, commercial and industrial markets.

In the future, storage could provide benefits to the grid, such as demand side management, resiliency and capacity improvements. Besides a few state pilot programs and PJM’s inclusion of behind-the-meter resources for fast frequency regulation, existing market rules and state policies restrict using customer resources for grid services. Still, GTM says storage used for grid improvement is an untapped opportunity. Grid services could be monetized through payments by utilities or from ISO/RTO for wholesale market participation.

Utility-scale projects increasingly will be paired with storage, driven mainly by energy storage mandates. The rise of utility-scale storage projects with other generation assets has been fairly common, and utility-scale solar is seeing similar adoption as solar and storage costs keep coming down. In recent months, several utilities have issued RFPs to deploy storage at new or existing solar farms. The main uses of these systems will be to provide renewable integration as well as firmer solar output.

We will soon see the rise of solar-plus-storage. Right now, the market is in its infancy. Less than 00.1% of solar installations were paired with storage in 2014, adding up to a total of 4 MW. The numbers become more impressive, however, through the end of the decade. GTM forecasts 22 MW of solar-with-storage in 2015 and 776 MW of solar-storage in 2020. For comparison, the U.S. installed 7,000 MW of solar last year.